Banks Face Reckoning as Housing Storm Brews

By the Editorial Team · Monday, November 2, 2026

Australian banks are reporting stagnant or shrinking profits as the housing market experiences its worst decline in 40 years, prompting lenders like NAB and Westpac to implement significant cost-cutting measures and job reductions. This downturn, driven by falling home loan demand and tighter tax policies, is intensifying competition and pressure on net interest margins, with analysts warning of potential future financial stresses despite stable current bad debt levels.

The major Australian banks are facing mounting challenges as the housing market endures its sharpest downturn in four decades, prompting cost-cutting measures amid subdued revenue growth. The softer economic environment is expected to weigh on upcoming full-year financial results as lenders grapple with falling home loan demand and rising competitive pressures.

Westpac will kick off the reporting season on Monday, with forecasts pointing to a flat annual cash profit of approximately A$7 billion. The lender’s performance reflects cautious consumer behavior, as property investors and first-time buyers withdraw from the market in response to tax changes introduced in the federal budget released in May, which have contributed to the housing slump.

National Australia Bank (NAB), anticipated to report around A$6.3 billion in cash profit on Thursday, has already announced significant cost reductions, including plans to cut 2,500 jobs. NAB’s mortgage portfolio shrank in September—marking the second contraction in the past three months—according to data from the Australian Prudential Regulation Authority (APRA) released last week. Despite a 7 percent increase in overall housing credit compared to a year ago, home loan applications have declined by about 15 percent, driven largely by restrictions on negative gearing and capital gains tax incentives.

Housing prices nationwide are forecasted to decline between 10 and 15 percent from peak levels through the second half of 2027, according to last month’s analysis by Morgan Stanley. These difficulties are intensifying competition within the mortgage sector and pressuring banks’ net interest margins.

Industry experts expect banks to emphasize retention of existing loan customers and reducing origination and servicing costs by streamlining operations and simplifying product offerings. PwC Australia’s banking and capital markets leader, Noel Williams, said efficiency initiatives have become more urgent amid the challenging conditions, with mortgage demand softening and business headwinds mounting.

Westpac is projected to declare a full-year dividend of A$1.55 per share, slightly higher than the previous year, supported by its ongoing Unite technology and Catalyst cost-cutting programs. ANZ, scheduled to report on November 9 with an expected profit of A$7.5 billion, has realized A$875 million in cost savings over the past year after cutting 3,500 staff.

NAB’s update will likely coincide with an interest rate increase announced by the Reserve Bank of Australia (RBA) on Tuesday, following hawkish remarks by Deputy Governor Andrew Hauser in late October. Despite four rate hikes this year, elevated bad debts have yet to materialize, as most borrowers appear to be adjusting spending to cope with higher costs.

Analysts warn that intense competition remains on both lending and deposit fronts, suggesting the full impact of monetary tightening on bank balance sheets may still be forthcoming. Jon Mott, head of banks research at Barrenjoey, described the results as potentially “the calm before the storm.”

Market observers will also scrutinize capital management strategies, with particular attention on NAB’s relatively modest capital buffer and its payout ratio, which is near the upper range of target dividends. Both NAB and Westpac are expected to maintain dividend payouts between 65 and 75 percent of profits.

Macquarie Group will report first-half results for its banking division on Friday, with data showing it has expanded its market share to 7.58 percent over the past year—outpacing the sector average significantly. The bank is also expected to discuss business credit conditions, which are forecasted to grow by 6.1 percent within the coming year.

However, concerns over increasing bad debts remain, especially in construction, following the collapse of property developer Bathla, which has raised questions about risk exposure in private credit markets. Banks may need to boost provisions to mitigate potential losses.

Commonwealth Bank is scheduled to provide an updated quarterly profit figure on November 11, rounding out a critical earnings period for the Australian banking sector amid growing economic uncertainties.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.